Clearwater Paper(CLW) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $64 million for Q3 2024, which was within the guidance range of$ 58 million to $68 million, impacted negatively by approximately$ 5 million due to Hurricane Helene [7][32] - The sale of the tissue business for $1.06 billion is expected to net approximately$ 850 million in cash after taxes and expenses, which will be used to pay down outstanding credit facilities [8][9] - The board approved a $100 million share repurchase program to buy back shares when they trade at a sufficient discount to inherent value [9] Business Line Data and Key Metrics Changes - Paperboard delivered$ 42 million of adjusted EBITDA in Q3 2024, up from $11 million in Q2 but down from$ 53 million year-over-year [32] - Tissue delivered $41 million of adjusted EBITDA in Q3, flat compared to Q2 and slightly up from last year, with private brands gaining market share [34] Market Data and Key Metrics Changes - Industry SBS shipments increased by 2.4% in Q3 2024 compared to the previous quarter and 2.5% year-to-date versus 2023 [33] - Despite the recovery, industry shipments remain below pre-COVID levels, with expectations for continued recovery into 2025 and 2026 [33] Company Strategy and Development Direction - The company is transforming into a premier paperboard packaging supplier focused on servicing independent converters in North America following the sale of its tissue business [9][23] - The strategy includes driving operational improvements, expanding product range, and addressing market trends such as lighter weight paperboard and compostable solutions [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term industry fundamentals despite the current down cycle in SBS, driven by supply-demand imbalances and new capacity coming online in 2025 [22][38] - The company targets adjusted EBITDA margins of 8% to 10% in 2025, with a focus on cost reductions and maintaining a strong balance sheet [36][40] Other Important Information - The company plans to incur$ 40 million to $50 million in direct major maintenance expenses next year, with a shift to an annual maintenance outage cadence expected to improve operating performance [37] - The company aims to maintain a net leverage ratio of 1x to 2x through the cycle, lower than the previous target of 2.5x [40] Q&A Session Summary Question: Can you provide details on investments for lighter weight products? - Management indicated that investments would be small-to-medium sized, measured in millions, aimed at improving pulpers to incorporate additional pulp streams [46][47] Question: What are the expectations for cost reductions? - Management targets a 10% reduction in fixed costs and a 6% SG&A spend as a percentage of sales, estimating annualized savings of over$ 50 million [50][51] Question: Will there be an impact from Hurricane Helene in Q4? - Management confirmed an additional $2 million to$ 3 million impact from the hurricane in Q4, which is included in the guidance [54]